Total lending falling despite housing bubble

Today’s Lending Finance data, released by the ABS, revealed that total lending continued to fall in December and is well past its peak.

The below charts, which track lending on a trend basis, illustrate the current state of play.

First, total finance commitments peaked in June 2014, and have been trending down ever since, down 8.6% since June:

The overall fall in finance commitments has been driven by commercial, where the value of commitments has fallen 15.7% since June 2014:

The fall in commercial finance commitments is curious given they include loans to investment properties, which have been booming (see my earlier post on the Sydney investor bubble). This suggests that loans to other commercial enterprises – the productive economy – have fallen fairly sharply.

Most of the other components of lending have also been weakening. Housing renovation activity has fallen for four consecutive months and is down 4.5% since June:

Lease finance commitments have been falling sharply, down 11.8% since June:

Whereas personal finance commitments have plateaued, up only 1.5% since June but falling over the past few months:

The notable exception to all this is owner-occupied housing finance commitments (excluding renovations), which hit a new record in December, up 4.8% since June:

I like how the fall in total lending is on a par with the lead up to the GFC. I would love Mr Keen to respond to that post given the implications for rate of change in growth of debt and the large correlation it has to employment.

The data also looks similar to the period leading up to the 91 recession/financial crisis. The muppets were still loading up on investment loans, though underneath the real economy was falling into a pit.

This is the begining of the end. The come to Jesus moment will be Xmas 15

I think this is actually good news for everybody not totally self absorbed in the capital city markets. There will be a value crash, no question, but setting fire to investment markets in Sydney/Melb/Perth/Brisbane will leave the rest of us unscathed. Sucks to be you capital city numpties.

If I was going to take a guess, I would say Sydney is the stupidest place on earth. Perth is going to be under immense pressure as people realise they can’t pay the mortgages on their rentals once they lose their mining construction job (will take another 3 months). Brisbane lags a bit but coal mining will self destruct and another set of FIFO workers will lose their shirts. Melbourne I have no idea about, I am guessing migration and a levelling out effect is taking place there i.e. they are just following the pack.

Thing is that Sydney still pays the highest hourly rates in the country if your a tradie and there is always work even after the frequent building industry busts, even though overtime dries up during such periods for wage guys.

Though the the 130k/a I’ve been pulling at cloudbreak for the last 3.5 years has been an easy, guaranteed income, allowing the wife to stay at home till the kids are in school which they now are, the hourly rate paid to the plumbers and sparkies I meet on site is much less than the going rates in Sydney.
the higher p\a income coming only from the insane hours worked at a flat , lower rate.

Though a correction seem certain in Syd I don’t see a collapse coming like in Port Headland or Newman (caused really by the laying off of only a few hundred people in the case of Newman)

I got laid off with all the other 17 first year tradesmen in 1991 (finishing the new international airport terminal) and although the jobs going during that recession period were quite often quite crappy (literally), being Sydney there was always work available for those driven to maintain their required income.

It may be like that again in Sydney. I was a plumber in Melbourne at that time and its was much much harder. Victoria lost its biggest bank gone! poof # and of course Pyramid was backstopped by the taxpayer.

But if the cash is AUD (not USD), it has to be withdrawn from somewhere when the person arrives? Or are you suggesting they first own a small business (take away, milk bar) and pocket all cash from the business first ?

” Question – Isn’t there a rule somewhere that the Government is Automatically notified whenever someone withdraws more than 10K in cash?”

I thought that “law” was only for payments and deposits not withdrawal’s

Casino’s are a big one for washing dirty cash. Chinese big dick sends his wife and, say, 4 of her friends with just under 10k each to buy casino chips, get on the piss for a few hours, gamble a little and then cash in the 90% of the chips they brought as “winnings with a receipt please”

With all this dodgey Chinese money flowing into Sydney, no wonder Packer wants in.

And im thinking Young James needs to pull out of Macau before the Chinese bend him over , like his daddy did to Bondy.

I’d love to start a Fortune Cookie company with messages in them like “The Tax Office is Watching you”, the “FIRB knows about your secret properties”, etc.. Sell them at a street stall in Chinatown and watch the reactions of people as they open them… 🙂

Given the downturn in mining and resource related investment the downturn in total lending is to be expected.

The scale of the resource related investment (and the debt increases that financed it) was many times the current increase in construction.

The net borrowing for purchasing dwellings is probably not much at all considering repayments by all owners with mortgages and most owners havng enjoyed the increase in their old property when paying more for the new one so the net difference isn’t that much for many people.